Difficulties related to bank loans and soaring prices are dragging the property market into a slump, experts said.

The global economic downturn and inflation, credit restrictions, limited supply of properties, and rising prices are major challenges for developers, Nguyen Hong Thang, deputy director of R&D at DKRA Group, said.

The State Bank of Viet Nam’s directive to strictly control real estate credit risks has put significant pressure on both developers and buyers, he told a forum on property supply in HCM City on October 28.

The slump is set to worsen, he warned.

This year, there has been limited new supply in the HCM City real estate market, mostly from small projects in outlying districts like Cu Chi, Hoc Mon and Nha Be.

The absorption rate has been low since the middle of the second quarter, he said.

He called on city authorities to speed up reforms of licensing procedures for property projects.

Real estate developers need to look beyond bank loans and at other sources of capital such as foreign investment funds and bonds, he said.

Le Hoang Chau, chairman of the HCM City Real Estate Association, blamed legal obstacles for the slow implementation of property projects and limited new supply.

More than 100 projects have been delayed due to legal obstacles, he said.

According to a Savills Viet Nam report on the city property market, primary supply in the third quarter fell by 51 per cent to 6,600 units.

Only 35 per cent of new supply was absorbed because of high prices. More than 60 per cent cost above VND11 billion (US$442,300) a unit.

In Q3, primary market prices went up to VND124 million ($4,900) per square metre, and the next phase of existing projects will see prices increase by 10 per cent.

Low supply and high prices in the city mean demand is moving to nearby provinces that offer more affordable products, according to Savills. — VNS